Tesco faces £2.5bn bill after equal pay court defeat

Tesco faces a £2.5billion bill after Europe’s top court backed thousands of shop floor workers in a mammoth equal pay lawsuit.

The European Court of Justice (ECJ) ruled that an EU law could be used in an employment tribunal being brought against Britain’s biggest grocer.

The store staff – who are mostly women – have accused Tesco of paying them up to £3-an-hour less than the company’s warehouse workers, who are mostly men.

The 6,000 workers in the case argue their work is of equal value and that the differences in their rates is sexist – breaching UK and EU laws.

The ECJ’s landmark decision could trigger back pay claims of more than £2.5billion for as many as 25,000 female workers, who might be owed compensation for being underpaid for at least seven years. 

Tesco’s equal pay case is the latest in a string of lawsuits dubbed ‘Made in Dagenham for the 21st century’ – in reference to the film about strikes by women at the Ford factory in the 1960s.

In March, the Supreme Court ruled that lower-paid staff who work on the shop floor at Asda can compare themselves with higher-paid workers in warehouses.

It was widely expected that the Supreme Court’s ruling could have a knock-on effect for other cases – and the ECJ decision could too.

Costly: Tesco chief exec Ken Murphy. The grocer has insisted the difference in pay had nothing to do with gender

There are similar equal pay claims against the likes of Sainsbury’s, Morrisons and Co-op. It is thought the industry could be facing a bill of £10billion from a string of claims.

Pam Jenkins, who works at Tesco, said: ‘To get a judgment confirming shop floor workers can use an easier legal test to compare their jobs to male colleagues in distribution is uplifting.

I’ve always been proud to work at Tesco, but knowing that male colleagues working in distribution centres are being paid more is demoralising.

‘I’m hopeful that Tesco will recognise the contribution shop floor workers make to the business and reflect that in our pay.’

Tesco and the law firm Leigh Day, which represented the workers, asked the ECJ to clarify a specific part of European law, which is whether a ‘single source’ test applies to businesses in the UK after it was brought up at the tribunal.

Under EU law, a worker can be compared with someone working in a different establishment if a ‘single source’ has the power to correct the difference in pay.

Tesco claimed this was not applicable in the UK – but the ECJ ruled it applies to British businesses. 

The decision – which is final – will become a part of UK law and will apply to any future equal pay case despite Britain leaving the EU, Leigh Day said.

It is expected to be one of the last major decisions on UK employment matters made by the EU before the changes triggered by Brexit come into force.

The tribunal will still ultimately make the decision on the Tesco case – though it will need to take the ECJ’s ruling into account.

Kiran Daurka, a partner in the employment team at Leigh Day, which represents the employees, said: ‘This judgment is simple, if there is a single body responsible for ensuring equality, the roles are comparable. 

‘Clarification from the ECJ confirms that this single source test can be relied upon by people in the UK bringing an equal value claim.’

Tesco claims the jobs in its stores and its distribution centres are fundamentally different – which justifies the differences in pay. 

A spokesman said: ‘These roles require different skills and demand which lead to variations in pay – but this has absolutely nothing to do with gender.’